Real Estate Investing

I used my home equity to buy an investment property

I have two boys going to the same university and decided it was time to invest in a rental property rather than pay their rent for the next four years. I ran a rent vs buy scenario, projected the appreciation value and principle buy-down over the next five years, and found out I could net nearly $60,000 by renting out the other rooms to their friends. If it works out, I’ll likely keep this rental for my daughter who’s in high school thinking about going to the same university. Steve Carter, my Intercap loan officer helped me run the numbers.

We picked out a brand new townhome and I was just about to put down 20% on an investment loan when interest rates took a plunge due to the caronavirus scare. With Steve’s help, we realized I had enough equity in my home that I could get a cash-out refinance at 2.75% APR. Luck has it that I don’t have to put any money down, I can take out enough to finish the townhome basement for additional rental income, and my new mortgage payment will be considerably less than taking out an investment loan. This increases my investment CAP rate (expected rate of return) on the townhome so much that I’m thinking of buying another investment property.

You are crazy not to take advantage of these low interest rates. Whether you want to lower your monthly payment or tap into your equity, this is a great time to talk to an Intercap loan officer and discuss a purchase or refinance.

Mike Anderson

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